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Sunday, December 17, 2006

Buy Federated (FD) & Nordstrom (JWN)

There has been a lot of negativity recently surrounding Federated (FD), which owns both Macy's and Bloomingdale's. Sales in Midwestern stores are estimated to be off 11-20% from consumer backlash against converting Marshall Field's stores into Macy's. Eventually, these customers will come back looking for great deals and quality products. In the meantime, the trade is to buy Nordstrom (JWN), which has many stores directly next to Marshall Field's/Macy's stores in the Midwest. The bad news is already priced into Federated, which makes it a great buy at $38. FD can't lose any more loyal Marshall Field's customers. Take advantage with the recent decline from $45 to $38 in and buy Federated.

The trade is to buy Nordstrom now and sell it after they report a monster same store sales number the first week of January. Hold Federated long term as customers will come back that were once loyal to Marshall Field's. Carl Ichan has also considered Federated as a LBO candidate because of its real estate holdings.

Note: I am currently a seasonal employee at Macy's. As of 12/17/06, I have no position in FD or JWN.